Operating in a tourist-heavy city such as New Orleans can be a gold mine for hospitality businesses, but comes with its own challenges and hurdles, as COVID-19 taught business owners.. Urban South founder and CEO Jacob Landry shares what it’s like to run a brewery in the city in the latest edition of Brewbound’s Insider-exclusive Q&A series A Round With.
Below are excerpts from the Q&A.
The challenges of operating in New Orleans came to the forefront with the news that Faubourg was being auctioned off. What are the biggest challenges for Urban South in operating in the city?
Jacob: New Orleans is a special place. It’s referred to as “The city that care forgot.” There’s a laissez-faire way about the city that both contributes to its charm and sometimes makes it challenging to get things done.
We wrestle with this juxtaposition operating here – welcoming a huge number of visitors to the city that allows us to punch outside of our weight in terms of population and beer sales, and dealing with an aging infrastructure and sinking city. We’ve dealt with multiple hurricanes that have shut down operations for more than a week, a random freeze that busted the city’s aging pipes and deprived us of water for a week, and multiple employees’ cars being stolen during spikes in citywide crime.
On the flipside, what opportunities do you see operating there?
Jacob: There’s no other American city with such a distinct and organic cultural fabric. This is what keeps folks here and keeps visitors coming back. The unique melange of cultures layered over more than 300 years has created incredible music, architecture, food and hospitality that is unrivaled.
Have you had any wins lately that have surprised you?
Jacob: We’re seeing some rebound in the on-premise, both in our retail spaces and in distribution. We’re still not at 2019 levels in our taproom, but to-go beer sales are ticking up, and we’re getting close to that high water point.
You launched a hard tea brand called Juvie Juice late last year in partnership with rapper Juvenile. That’s been a hard area to compete in in the past and more competitors are entering the space. What have you learned from that release?
Jacob: It’s hard to compete in a category that is dominated by the few and the large, so we don’t expect to ever do the volume of a Twisted Tea. However, we’ve been pleased with the reception of the product, particularly in the New Orleans market. The launch timed up with a resurgence of Juvenile’s career – if you haven’t watched his Tiny Desk Concert, it’s a must see (NSFW).
The SKU is our No. 4 brand as a company after just one year. It’s shown us how a targeted collaboration that’s regionally relevant and with someone willing to fully buy-in can serve as a great enhancement to a portfolio.
Urban South introduced THC seltzer brand Driftee at the end of last year. What have you learned about playing in that space over the last four months or so?
Jacob: This is the first time we’ve jumped into a brand new category this early, so it’s fascinating to see how quickly it’s evolving. The patchwork of state regulations has kept the biggest players from getting in, so it also feels like there’s more opportunity than there ever was in some of the other categories we’ve watched – i.e. seltzer, hard ice tea, etc.
However, legislation is still popping up, even in states with established markets, so it’s a bit like whack-a-mole in terms of figuring out what you can do where. We’ve also faced a lot of hesitation from our established distributors, so right now it seems as if only smaller independent wholesalers are willing to pick it up.
How big of an opportunity do you see for THC-infused beverages?
Jacob: I think there’s still huge opportunity, but it might take a different approach than we’re used to. We’ve built Urban South organically, using the craft beer playbook. I think THC will require shifting to the big brand, big money playbook, which will take some learning and adjusting for us to pursue.
Urban South acquired Perfect Plain Brewing in Florida in 2022. How has the entry into Florida gone?
Jacob: We’ve been very pleased with this acquisition and brand building. The brand wasn’t in distribution in a big way, so we were able to launch it through the Florida panhandle right off the bat.
A year in, we’ve been able to secure two Urban South and two Perfect Plain SKUs in Publix sets, which should lead to strong growth in 2024. We’ve captured a lot of synergies by being able to build two brands in a region that we felt was a little underdeveloped with regards to craft beer.
The acquisition also came with three bars (The Well, Garden & Grain and Perennial), which is a new game for us, but one we’ve enjoyed leaning into.
You recently announced the closure of Urban South Houston. What were the challenges with operating that location outside the brewery’s home state, and do you see Urban South having a presence in the city again in the future?
Jacob: Urban South Houston was interesting from the very beginning. We opened in February 2020, so our on-premise was shut down three weeks later due to the COVID[-19] pandemic.
We pivoted hard into smoothie sours and saw some fantastic sales over the first 18 months. As the pandemic went away, the market for those beers also slowed significantly. This timed up with our landlord selling off most of our parking lot, and starting construction of about 600 apartment units, so we’ve been in a construction zone for the past 18 months. This just destroyed the business, as customers couldn’t reliably get to our space.
Texas law doesn’t allow for the transfer of beer from one manufacturing facility to another, so for us to give a Houston taproom another go, we’d need to see that change.
What’s the biggest opportunity you see for Urban South the rest of the year?
Jacob: With legislative sessions ending in surrounding states, we’ll have some good runway to push hard on the THC seltzer front, so I’m excited about how the rest of the year will play out in that regard.
We’re also getting to the back end of some raw materials contracts signed at the height of post pandemic inflation, so I see some opportunities in tightening up the bottom line when it comes to our cost of goods sold. We also just launched statewide distribution in Alabama and were given the opportunity in Publix, so those two new markets should continue to drive growth for us at a time when growth is no longer a given.